Sorry I can't help you out there.
However, services like these are usually 4digits/month.
Vega of calendars
- Thread starter LM3886
- Start date
However, services like these are usually 4digits/month.
I see. Thanks. Could you still name some services as examples? I'm unlikely to subscribe but I'm curious to learn what they may look like.
I think Orats can chart constant IV of different duration and percent of spot (30/60/90/120,180 days) vs one another..
Matt's (the owner) is on the forum and it's very reasonably priced..
Colin Bennet has a book,Trading Volatility which discusses Delta Vega of different durations
Matt's (the owner) is on the forum and it's very reasonably priced..
Colin Bennet has a book,Trading Volatility which discusses Delta Vega of different durations
For the lack of better alternatives, why complicate things then, instead of keeping them simple? In a calendar the vol of expiring leg will eventually end at zero, while you seem to worry about some fluctuations in between?
You could stabilize them using other options/hedges, just like a vertical spread or a box are more stable, so a combination of calendar with other options can also provide some stability.
Though your initial question seemed like you didn’t understand that the Vega is based on both legs, so I suspect you’re just wishing for some unspecific things and looking for stuff that you won’t even need or use, or that won’t make a difference, or that you will decide that it was a waste of time. Many options traders are successful using basic options P&L in ToS, and I think it’s sufficient at showing the average and final outcomes. Only if you observe specific deviations over time then you may be able to clarify your own needs.
Though I’m also interested in other options pricing modeling products to see what can be so different and more useful about them. Some high-end options software that I’ve seen in the past did show additional calculations besides standard greeks (like measure of skews, call IV vs put IV, etc), but the greeks looked standard and I didn’t see anything more predictive than what you can see in ToS. Anything that could be predicted was useful maybe 20 years ago anyway, while now everything that can be predicted is priced in, so the price and therefore the greeks reflect the available knowledge. The vol of any leg can go up or down until they expire, so what.
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G,it seems like you are looking at calanders from the perspective of the near and far month being relatively tight.
You can not,or should not ignore second order effects (vonna,vomma) if you trade calanders that are spaced 9 months apart (or more).
Your statement about everything being priced in is not correct..You want to be long a 3/12
( 9 month) ATM foward time spread for 7% of spot and have that shit implode on you on a hard move down??
If you trade things like that,you should have a good idea of what Mr Muppet was talking about...
FWIW,this is exactly why I dont trade long dated time spreads..Havent the need for the pain
You can not,or should not ignore second order effects (vonna,vomma) if you trade calanders that are spaced 9 months apart (or more).
Your statement about everything being priced in is not correct..You want to be long a 3/12
( 9 month) ATM foward time spread for 7% of spot and have that shit implode on you on a hard move down??
If you trade things like that,you should have a good idea of what Mr Muppet was talking about...
FWIW,this is exactly why I dont trade long dated time spreads..Havent the need for the pain
G,it seems like you are looking at calanders from the perspective of the near and far month being relatively tight.
You can not,or should not ignore second order effects (vonna,vomma) if you trade calanders that are spaced 9 months apart (or more).
Your statement about everything being priced in is not correct..You want to be long a 3/12
( 9 month) ATM foward time spread for 7% of spot and have that shit implode on you on a hard move down??
If you trade things like that,you should have a good idea of what Mr Muppet was talking about...
FWIW,this is exactly why I dont trade long dated time spreads..Havent the need for the pain
I think that everything that you wrote is understandable, but you can experiment with those scenarios and see the results on the P&L graph in ToS. Trying to predict what actually will happen shouldn't be necessary if you cover your bases for various scenarios. While the OP seems to try to predict one specific scenario by making assumptions about specific vol, specific month and specific Vega, which not only won't protect him from any problems but will expose him to more risks since he will be planning for something specific.
BTW, Vomma is overrated. I'm usually Vomma positive but sometimes I'm hugely negative Vomma and still safe. Maybe it's because of even higher Ultima, or maybe because of logic. The greeks are just one way to measure things, and they can change too, including Vomma.
For example here are my current greeks on SPX:
Delta: -0.11. Theta: 205.00. Gamma: 0.00. Vega: 582.00. Vomma: -11,149.35. Ultima: 251,235.72
(some losses are possible and expected but not as large as on the above chart, while I can also adjust and hedge further as needed)
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Thing is that calendars with a wide time difference suffer from different flow influence.
Let's take an extreme example: short 1m / long 24month, calls, same strike (ATM)
First of all, this spread isn't delta neutral. The 1m is a theta/gamma play (aka IV vs. realized) whereas the LEAP is only a vega play. The vol of the LEAP is influenced by a few big tickets that can alter the entire skew whereas the 1m is traded on a regular basis.
Vega moves a lot for the 1m but the 2nd order greek risk is relatively miniscule. However, if you change the implied volatility of the LEAP things are different.
Let's say you're in this trade and like @taowave mentioned, the underlying tanks on you and vol increases...which is ought to be a good thing, right? But what about the delta of the LEAP? Right, it gets more long deltas as volatility increases, since you're long vanna.
In addition, your short 1M explodes because short term IV just moved 10x the long term vol and you lose on vega and gamma.
I find the risk graphs of calendars particularly deceiving. It's good to have an intuitive understanding of the positions behaviour before one falls in love with break even points and max payout scenarios
Let's take an extreme example: short 1m / long 24month, calls, same strike (ATM)
First of all, this spread isn't delta neutral. The 1m is a theta/gamma play (aka IV vs. realized) whereas the LEAP is only a vega play. The vol of the LEAP is influenced by a few big tickets that can alter the entire skew whereas the 1m is traded on a regular basis.
Vega moves a lot for the 1m but the 2nd order greek risk is relatively miniscule. However, if you change the implied volatility of the LEAP things are different.
Let's say you're in this trade and like @taowave mentioned, the underlying tanks on you and vol increases...which is ought to be a good thing, right? But what about the delta of the LEAP? Right, it gets more long deltas as volatility increases, since you're long vanna.
In addition, your short 1M explodes because short term IV just moved 10x the long term vol and you lose on vega and gamma.
I find the risk graphs of calendars particularly deceiving. It's good to have an intuitive understanding of the positions behaviour before one falls in love with break even points and max payout scenarios
Did you increase vol 40 percent across the board or did you nuke short dated and do you have wide duration calenders?
the question is: which term is your vega located at? And how does your position delta move with volatility?